New to WCI and have a couple questions - wasn't sure which forum to post this in.
I'm 34 years old, 5 years post-residency, 3 years post-fellowship. I am reading about the perils of whole life insurance on this website and am wondering if I made a mistake. I am already maxing out both 401k and my physician group's pre-tax profit sharing plan. I have a $1 million term life insurance policy, and a $1 million convertible life insurance policy (have converted 75% - $750,000 - over last 5 years). My financial advisor (whom I now realize is also an insurance agent) set up the strategy of "buckets of money" for retirement. One first maximizes 401k and profit sharing to have one "bucket", then puts money into whole life insurance to get the cash value at the end in a second "bucket". During retirement, one takes money from the 401k during up market years, and money from the cash value of the insurance policy during down market years. This made perfect sense at the time, since it appears mathematically obvious what happens to happens when you withdraw money from a 401k during a down market year and eat into principal.
I never knew of backdoor Roth IRAs until a few weeks ago by word of mouth and have been reading about them on the WCI website. I could probably fund a backdoor Roth for myself and most of one for my wife every year with the premiums on this whole life policy.
My question is two-fold: 1) This "buckets of money" strategy made sense at the time - one bucket for up market years and a second bucket for down market years. Is this a reasonable strategy? 2) If so, is there a better way to build the second "bucket" for down market years? For example, from what little of I know of Roth IRAs, they appear very flexible in terms of what you can invest the money in. Is there some method of using a backdoor Roth to get a cash value in this second "bucket" of money to withdraw from in retirement during down market years? Or is that strategy completely bunk?
Appreciate any input - trying not to sound very naive. The consensus on WCI certainly favors Roth IRAs over whole life insurance for tax and flexibility reasons. But what about down market years in retirement and eating into principal?
I'm 34 years old, 5 years post-residency, 3 years post-fellowship. I am reading about the perils of whole life insurance on this website and am wondering if I made a mistake. I am already maxing out both 401k and my physician group's pre-tax profit sharing plan. I have a $1 million term life insurance policy, and a $1 million convertible life insurance policy (have converted 75% - $750,000 - over last 5 years). My financial advisor (whom I now realize is also an insurance agent) set up the strategy of "buckets of money" for retirement. One first maximizes 401k and profit sharing to have one "bucket", then puts money into whole life insurance to get the cash value at the end in a second "bucket". During retirement, one takes money from the 401k during up market years, and money from the cash value of the insurance policy during down market years. This made perfect sense at the time, since it appears mathematically obvious what happens to happens when you withdraw money from a 401k during a down market year and eat into principal.
I never knew of backdoor Roth IRAs until a few weeks ago by word of mouth and have been reading about them on the WCI website. I could probably fund a backdoor Roth for myself and most of one for my wife every year with the premiums on this whole life policy.
My question is two-fold: 1) This "buckets of money" strategy made sense at the time - one bucket for up market years and a second bucket for down market years. Is this a reasonable strategy? 2) If so, is there a better way to build the second "bucket" for down market years? For example, from what little of I know of Roth IRAs, they appear very flexible in terms of what you can invest the money in. Is there some method of using a backdoor Roth to get a cash value in this second "bucket" of money to withdraw from in retirement during down market years? Or is that strategy completely bunk?
Appreciate any input - trying not to sound very naive. The consensus on WCI certainly favors Roth IRAs over whole life insurance for tax and flexibility reasons. But what about down market years in retirement and eating into principal?
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